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Friday, October 28, 2011

Ballard Power Systems Inc

I do not own this stock (TSX-BLD), but I used to and I still follow it. I bought it because I liked its story of using fuel cells. This for me was a great story of us giving us the ability to go green. Seemed like a good thing to invest in. I do believe we have to stop using oil at some point. Using oil is one way that we pollute our environment and we have to look after our environment.

No matter what you might think about global warming/global change or whatever they are calling it now, we certainly can do more to protect our environment. Of course, the argument is not really about global warming/global change, since this is always happening. Also the world has gotten warmer since the little ice age (world has been warming since approximately 1850). The argument is about whether or not we are causing this, especially with CO2. The way I see it is that mankind likes to think that he is in charge. This is what I have doubts about, i.e. that mankind is really in charge.

Getting back to the stock I want to talk about, I do not think that any one can argue that the world would be better off if we could get off of our oil dependency (I am concerned about the fact that a lot of my utilities are oil pipelines, but that is another story).

It seems like a great idea at the time that is, investing in green energy. Make money while I help save the planet. However, it did not turn out that way. I think it is important to look investments that do not do so well as well as those that do. The first kind can be a cautionary tale.

I bought this stock in 1997 and sold it in 2006 and lost some 5.31% per year or 37.6% over 9 years. This stock hit a high of $194.00 per share in 2000. I bought at $17.34 and sold at $10.82. There was also a 3 to 1 share split in 1998. This stock is worth $1.40 a share today.

The company has had few years where it has any earnings, and none of positive cash flow, as far as I can see. Since 2002, the book value has gone down steadily. However, Revenue per share has been growing and over the past 5 and 10 years, it has grown around 10% per year. Total revenue however has not grown as well. The 10 year growth of Revenue over the past 5 and 10 years is 4% and 9%.

No one expects this stock to earn anything or have any cash flow over the next two years. However, sales are expected to grow. It is interesting that the company had revenue of $65M in 2010, it is expected to have $86M then $109M in revenue over this year and next, but it is not expected to make any money or have positive cash flow.

Over the past year there has been some minor insider buying and insider selling. Lots of insiders hold options. Some 74 Institutions hold around 13% of the shares of this company. Over the past 3 months there has been minor (less than 1%) selling of shares by institutions.

In the past there were a number of sell recommendations on this stock. The basic comment was that this company does not seem to be able to make any money. However, recently the shares have been upgraded and there are some Strong Buy and Buy recommendations, along with some Hold recommendations. The consensus recommendation is a Buy. Buy recommendations come with a 12 month stock price of $2.48.

You have to wonder about buying this stock. It does not seem to be able to make any money. No one expects it to make any money this year or next, but they do expect the share price to move up from current $1.40 to $2.48, a 77% run up?

Ballard Power Systems designs and manufactures clean energy hydrogen fuel cells. Better energy, delivered through our focused fuel cell innovations, offers the Power to Change end-user applications, while also improving the environment. Its web site is here Ballard. See my spreadsheet at bld.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

About Me

I haven’t had a main stream job since 1999.
To do this was a two prong attack of controlling spending and earning income.
I exercise, then run each day before breakfast. I read in the morning, then I go to Starbucks for coffee. I work on my computer in the afternoon. Follow me on twitter at http://twitter.com/spbrunner.